Unclarity persists for numerous industries over the details of the US-EU accord, involving alcohol, pharmaceuticals, and steel sectors.
The compromise reached between Ursula von der Leyen, President of the European Commission, and Donald Trump on July 27, 2020, has been a new development in the trade relationship between the European Union and the United States. However, the agreement, which sets a 15% tariff on most European goods exported to the U.S., remains unwritten and has sparked a wave of confusion.
The key points of clarification needed for the tariff agreement arise from conflicting statements and the lack of a fully detailed, written understanding.
- Tariff rates and management: Trump has stated that the existing 50% tariffs on steel will remain, whereas von der Leyen has indicated tariffs will be reduced and managed via quotas. This discrepancy between a continued high tariff versus reductions or quota limits is a critical point needing precise clarification.
- Deal’s legal nature: Von der Leyen described the agreement as a framework rather than a detailed, final treaty, suggesting ongoing work to reduce tariffs on more products and address non-tariff barriers. Trump’s fact sheet highlights specific commitments, but the exact legal status and enforcement mechanisms are unclear.
- Non-tariff barriers: Both sides mention addressing non-tariff barriers (such as regulatory "red tape") which affect US exporters, especially small and medium businesses, but concrete measures and timelines are unspecified and need elaboration.
- Investment and trade commitments: Trump emphasizes the deal as part of a broader strategy to balance trade and reduce deficits, including $600 billion in EU investment and $750 billion in US energy exports, but how these commitments will be monitored or enforced within this "deal" is not clear.
Resolving these points is essential because the current discourse reflects diplomatic ambiguity, with Trump projecting a "big deal" narrative, while von der Leyen frames it more as a cautious framework. This ambiguity risks drifting EU-US trade relations rather than solidifying them.
Gilles Moëc, AXA's chief economist, published a macroeconomic note about the compromise on Monday, expressing concern over the agreement's ephemeral nature. The tariff agreement applies to goods exported from Europe to the United States, and its details, particularly its exclusions, are yet to be clarified.
The compromise's impact on the trade relationship between the European Union and the United States remains to be seen, as many things need to be clarified about the compromise. The compromise, if implemented, will affect the trade relationship between the two economic powerhouses significantly.
- The ongoing discord over tariff rates and management, particularly the conflict between Trump's statement of maintaining a 50% tariff on steel and von der Leyen's indication of tariff reductions or management via quotas, requires a definitive clarification.
- The legal status and enforcement mechanisms of the agreement, as shown by the contrast between von der Leyen's characterization of it as a framework and Trump's highlighting of specific commitments, need to be addressed for a clear understanding of the deal.
